Banks urge unclaimed-accounts reversal after customer complaints

Clancy Yeates

Banks are urging the government to reverse a Labor decision to take possession of "unclaimed" savings accounts after three years of inactivity, citing a sharp increase in customer complaints since the controversial changes were made.

But despite a surge in "unclaimed" funds collected by the government, consumer advocates are divided, with some warning that rolling back the policy could result in more money being eroded by bank fees.

In late 2012 as the former government was trying to deliver a budget surplus, it made changes forcing the Australian Securities and Investments Commission to claim dormant bank accounts after three years of inactivity, down from seven years previously. There has since been a jump in the amount of "unclaimed" money flowing to government coffers, with nearly $360 million collected in the year to May.

After opposing Labor's changes in Opposition, the government is now consulting with industry and consumer groups over whether it should extend the threshold before accounts are claimed by ASIC. Fairfax has previously reported the government will scrap Labor's changes, but this has not been confirmed publicly.

The Australian Bankers' Association said in a submission to Treasury it had experienced a 300 per cent jump in complaints from a wide range of customers since the changes were made.

Some of the most common complaints were that consumers were unaware of the change in the rules, that they had been switched into an account paying less interest, or their money had been changed from a foreign currency into Australian dollars.

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It argued for a return to a seven-year period, saying this was a more appropriate time for determining if an account was really inactive. The change will save banks money by lowering their administration costs.

"We estimate that an increase in the period to seven years would have halve the numbers of claims, and reduce the administration, marketing and complaints handling costs for the banking industry and ASIC," it said.

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Bendigo and Adelaide Bank and HSBC argued that a five-year period of inactivity was adequate to determine whether accounts were genuinely "unclaimed."

National Seniors Australia also supported a reversal of the policy, which is designed to prevent money being eaten away by bank fees. While amounts reclaimed by ASIC have surged, it cited figures showing a much smaller percentage had been returned to customers since Labor's changes.

In contrast,Choice supported the three-year threshold, despite reservations about how the policy had been communicated to the public.

"You're better off getting an interest rate paid by the government than having your money eroded by bank fees, but they need to do a much better job of letting people know about it," head of campaigns Matt Levey said.

The Customer Owned Banking Association also argued against reversing Labor's policy, saying more time was needed to assess its impact.

Aside from extending the time before which ASIC steps in, Treasury is also considering making some types of accounts exempt from the rules, including those held in foreign currencies.